This MA thesis on Cultural Management is a critique of how economical and social value of culture is manifested in an agreement on cultural affairs between the municipalities ofEast Iceland and the Icelandic State, first established in 2001 and subsequently renewed in 2005 and 2008. Similar agreements have since been established with other municipalitiesin Iceland but are not as such a focus of this thesis. The research looks at matters leading up to the agreement, how the agreement has evolved and the two performance measurementsalready performed.In the main, this is an action research where the author reflects upon his own surroundings after 20 years of working in the cultural sector. The research is furthermore based on in-depth interviews with Karitas H. Gunnarsdóttir, director of The Department of Cultural Affairs at the Ministry of Education, Science and Culture in Iceland and Sign"Ormarsdóttir, the Cultural Attaché for the municipalities of East Iceland. Both women have held their current positions from the advent of the aforementioned agreement on cultural affairs. The research also led to an extensive look at developments in culturalpolicy in Europe, however mainly restricted to the Nordic region and the UK.The main result is that the ideology behind the agreement under study can be traced directly to the Neo-Capitalistic ideology of the Thatcher era in the UK and, later, the development of an ideology based on economic impact of creative industries, whichemerged with Tony Blair and the New Labour in 1997. In the early 1990ies, the Icelandic Government seems to have adopted these new ideas in public management (NPM). In regards to the cultural sector this however seems to have been done without defining cleargoals and the two performance measurements, that have already been applied, leave much to be desired. As regards current research on the economic impact of creative industries,this raises the question of whether history is about to repeat itself. The bottom line is that Icelandic needs to engage in a frank internal discussion of the value of art and culture forsociety in general, before going any further. Regarding the on going debate on how to value culture, it is clear that no specific approach will settle different opinions and thisstate of affairs is likely to remain that way in the foreseeable future.